European Union

Fostering Innovation for Green Growth

Green growth means fostering economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies.

Innovation is key to green growth. It helps decouple growth from natural capital depletion and contributes to economic growth and job creation. Business is the driver of innovation, but governments need to provide clear and stable market signals, for example through carbon pricing.

This book draws on work from across several parts of the OECD and explores policy actions for the deployment of new technologies and innovations as they emerge: investment in research and development, support for commercialisation, strengthening markets and fostering technology diffusion. Competition will be essential to bring out the best solutions.

Key findings include:

Investing in energy and environmental R&D is not enough. Only a small share of the key inventions that are aimed at addressing climate change emerge from energy or environmental R&D. R&D in fields such as chemistry, material sciences and engineering are much more important sources of scientific research for green technologies.

The Green Revolution is not yet an ICT revolution. We have not yet seen large and rapid declines in prices of green technology that will be needed to make green technologies a strong driver of economic performance. Also, the experience with ICT suggests that most of the jobs in greentech are likely to be in their application, not in their production.

Carbon taxes are not enough to stimulate green innovation. Putting a price on carbon is very important for incremental improvements to clean tech, but does not necessarily lead to breakthrough innovations. Public and private investment in research is also needed to drive long-term green innovation.

Not all policies for green innovation are expensive. Removing regulatory barriers to the growth of new firms can help spur entrepreneurship and generate new business models that challenge incumbent firms. Our earlier work on innovation already found that new firms account for an large share of patenting.

Changing consumer behaviour is important, and it works. Households charged for their water consumed 20% less water than those who are not charged.